Finicity is part of the Mastercard family. Our open banking platform provides the financial data you need.

Navy Federal Credit Union’s VP of omni-channel strategy and innovation Ryan Fairley discusses APIs, personal data and how open banking benefits members so they can control their personal information, manage how its accessed by external parties like third-party apps, and receive more transparency into the data sharing and open banking process.

Navy Federal recently signed its first data sharing agreement with open banking platform provider,  Finicity, a Mastercard® company. This allows Navy Federal customers to securely link their accounts to applications that use Finicity’s open banking platform.

You can read the full post Putting you in control of your personal data with a new API on the Navy Federal site.

Whether your company uses direct deposit or other direct payments through the ACH network, you’re likely leveraging WEB debit transfers in some way. And if you’re using WEB debits, you should be adhering to Nacha’s WEB debit rule. Doing so will not only keep you on good terms with Nacha, but it’s also an opportunity to enhance payment experiences and protect your company. Here’s how.

How Prevalent Is ACH Fraud?

Nacha’s WEB (meaning internet-initiated entry) debit compliance rules are designed to protect both the ACH network and your company from rising ACH fraud. The Association of Finance Professionals (AFP) 2020 Payments Fraud and Control Survey Report found that 81% of businesses were targets of payments fraud and 55% of businesses were directly impacted by ACH fraud, with 33% of that fraud from ACH debits and 22% from ACH credits. 

Fraud usually occurs when a criminal accesses a customer’s account and submits an unauthorized ACH transaction. In the past, all a criminal needed was an account number and a bank routing number. How many abandoned checkbooks might be floating around in the landfill, waiting for an eager fraudster?

With a third of businesses falling victim to ACH WEB debit fraud, it’s no wonder Nacha is updating its rules to protect both the ACH network and your company. 

What Are the Nacha WEB Debit Compliance Rules?

Nacha has established operating rules that keep the ACH network secure. As part of those operating rules, originators of WEB debit entries must use a “commercially reasonable fraudulent transaction detection system” to screen those debit transactions for fraud. What that detection system specifically looks like has been largely up to the businesses initiating ACH transfers. 

However, Nacha has recently augmented this requirement and now specifically requires that the “fraudulent transaction detection system” includes account validation. Under the new rule, an account must be validated with the first use of the account number, or after any changes to the account number. This updated rule aims to cut down on the WEB debit fraud that continues to climb.

When Do Businesses Need to Be in Compliance?

Nacha had originally set January 1, 2020, as the effective date for the new WEB debit rule. The Board of Directors then approved an extension to March 19, 2021 to allow businesses to educate themselves and implement the new processes. As of now, the WEB debit rule is in effect. Originators of WEB debit payments have one year from the effective date of the rule to implement an account validation solution.

How Can You Ensure Your Payments Are Compliant?

To be compliant with Nacha’s WEB debit rule, your payment solution must include some form of account validation. This validation can take several Nacha-approved forms:

Nacha also notes that companies may leverage other validation means. For example, proving that an account has a reliable history of prior successful payments may act as a sufficient validation. Ultimately, Nacha recognizes that every company’s position and situation is unique, and so determining whether an account validation method is “commercially reasonable” will differ, and each company should consult their own attorneys, risk department, or other advisors to ensure the validation method is compliant.

How Finicity’s Instant Account Verification Prevents Fraud and Enables A Better User Experience

Through our Finicity Pay™ solution set, we offer instant account validation that satisfies Nacha’s updated WEB debit rule and provides additional valuable data to improve the experience and efficiency of ACH payments. Our instant account validation enables money movers to mitigate fraud and maximize the accuracy of payment transactions by providing account and routing numbers, account owner verification, and balance checks to streamline and secure ACH payments. And with easy and fast consumer permissioning, our validation solution empowers consumers to benefit from their own data to have better financial services experiences.

In addition to validating account information, the consumer-permissioned data Fincity’s open banking platform provides can be used to check balances prior to processing payments to avoid fees and returns due to insufficient funds. It can also support Know Your Customer (KYC) by providing the name and address of the account owner on file at the financial institution. While this data is useful for payments, it can also be leveraged in account opening, digital wallet or prepaid card funding, or other use cases where similar information is needed.

Don’t just take our word for it. Nacha has named Finicity a Preferred Partner, which guarantees that our validation solution aligns with Nacha’s core strategies to advance the ACH networks. According to Nacha, those who are preferred partners:

Nacha’s WEB debit rule protects you and ensures better ACH payment experiences. And with Finicity’s instant validation solution, you’ll also empower your customers and get access to the highest-quality real-time data. To see our instant account validation in action, request a demo today.

Automated Clearing House (ACH) transfers may feel like one of those invisible processes that go largely unnoticed yet have become essential to everyday life, especially in business. When you received your last paycheck through direct deposit to your bank account, that was made possible through an ACH transfer. When you paid your utility bill directly from your checking account, you likely used an ACH transfer. 

If you’re already passively benefiting from ACH transfers, imagine the positive outcomes that could come from actively leveraging the ACH network. Here are six fundamentals to get you started. 

What Is ACH?

“ACH” stands for “Automated Clearing House,” which is a payment network built by the National Automated Clearing House Association (Nacha). An ACH payment is an electronic bank-to-bank payment enabled through the ACH network, rather than through a card network. ACH payments are also frequently called ACH “transfers” or ACH “transactions.” The ACH network is used in the United States, but there are also International ACH Transactions (IAT).

Banks and other financial institutions use the ACH network to aggregate transactions for batch processing. In a given year, the ACH network processes around 25 billion transactions, likely including your paychecks and monthly bill payments. There are three types of transactions:

  1. Direct Deposits: These transactions are any electronic transfer made from a business or government entity to a consumer. Direct deposit transactions may include: 
    • Paychecks and other employee expense reimbursements, bonuses, and commissions
    • Social security payments and other government benefits
    • Pension/401(k) disbursements
    • Annuities
    • Tax refunds
    • Interest payments
  2. Split Deposit: This transaction enables deposits to be split into different accounts. For example, an employee could have a percentage of their paycheck deposited into a savings account while the rest is put in checking.
  3. Direct Payments: If you’re sending money through the ACH network, then you’re making a direct payment. Payment solutions can enable any consumer to make these kinds of payments with their bank account:
    • Charity donations
    • Bill payments
    • Tuition payments
    • Send money through social payment apps
    • Send money to friends and family
    • Make ACH-enabled purchases

How Do ACH Transfers Work?

The ACH transfer happens in two key steps: initiating the payment and receiving the payment. Before you can initiate the transfer as the payment originator, a customer must first give the business approval to initiate the transfer. This approval usually happens by signing an ACH authorization form or through verbal agreement. During this initiation process, the customer can set up one-time payments, recurring payments, split deposits, and so on.

Once the customer has authorized the transfer, your bank account will “pull” the payment from the customer’s bank account. If your customer has insufficient funds, then the payment can “bounce” just like a paper check. 

“Pulling” money from an account is known as an ACH debit transaction. An ACH credit transaction, on the other hand, allows you to “push” money from one bank account to another.

What Are The Benefits Of Accepting ACH Transfers?

More and more businesses are leveraging ACH transfers in their business transactions. That increasing adoption has likely come as more businesses realize the benefits of ACH transfers for both them and their customers:

What Are The Costs Of ACH Transfers?

ACH transfers will save your business much more than processing fees or wire transfers (which we’ll get to in more detail shortly). The median cost per transfer is $0.29, but that number can rise or fall depending on:

What’s The Difference Between ACH Transfers and Wire Transfers?

In many instances, ACH transfers have replaced more traditional wire transfers. But that doesn’t mean that wire transfers have completely lost their utility. For example, wire transfers happen in real time, which means they can process within minutes or hours, where ACH transfers could take a few days. However, wire transfers cost more, typically between $20 and $30 for the customer, and the recipient frequently has to pay a fee as well. 

The bottom line: wire transfers are likely better for large-sum, international, or time-sensitive transactions, where ACH transfers are more appropriate for smaller, more frequent transactions that can stand to take a little longer to process.

How Does Finicity Enable ACH Transfers?

What does all of this have to do with Finicity? On March 19, Nacha implemented a new WEB Debit Rule that requires account validation with the first use of an account number, or following changes to the account number. The purpose of the rule is to reduce the chances of fraud. 

In order to help businesses satisfy Nacha’s new operating rule, Finicity delivers an instant account validation solution as part of our Finicity Pay solution set. In fact, Finicity is a Preferred Partner of Nacha for using instant account validation to mitigate fraud and maximize the accuracy of payment transactions by providing account and routing numbers, account owner and balance checks to make ACH payments even simpler. The speed and security of our open-banking-powered validation solutions also empower consumers with a streamlined, easy, digital-first experience.

ACH transfers are an innovative way for both businesses and consumers to move money while also cutting costs and saving time. Learn more about how Finicity is enabling secure and less risky ACH transfers.

Consumers know all too well how time consuming it can be to set up financial services or products. The last thing consumers want is to wait for microdeposits or other verifying procedures to clear so they can get access to their accounts or money in a new app. Consumers deserve a better experience, whether they’re accessing financial services or applying for a loan.

With instant account verification, consumers can connect to their financial accounts and apply for loans more quickly without having to jump through several hoops along the way. Let’s dive into further details about what instant bank account verification is, how consumers can use it to open a new bank account or get that loan they need, and the benefits of using Finicity’s AI-driven open banking technology. 

What Is Instant Bank Account Verification and When Do Consumers Use It?

Instant account verification (IAV) is a convenient and automated method that helps consumers connect to and fund new accounts. By enabling lenders and financial service providers to verify and access bank account data in a matter of seconds, IAV allows consumers to open accounts more quickly. These accounts may include a new online bank account, a new app that connects to a bank account, or even a loan application. 

Setting up accounts and applying for loans once took days to complete from start to finish. Now consumers can set them up in minutes. All that’s necessary is for the consumer to permission access to the specific accounts so they can direct how third parties use their data.

IAV is useful for those who want to use a new organization to either open an account or use one of their services. It can also be particularly helpful in situations where individuals already have a relationship with a financial institution and want to move money into their account or need a loan. For example, instant account verification may be used when applying for a personal loan to expedite the process and get the money into their account as quickly as possible.

At Finicity, we know digital verifications are invaluable to the loan process. With our open banking platform and its AI-driven analytic insights, we enable lenders to screen consumer credit history and consider eligibility quickly. That efficiency enables borrowers to get the loan they need without the hassle of finding and bringing in a paper trail of their historical data. Finicity uses instant account verification to provide a seamless user experience that enables consumers to take full charge of their finances. No matter what they’re trying to accomplish.

How Consumers Can Connect Their Accounts Online and Track Financial Data

Using our Finicity Connect widget as part of financial apps or services, connecting to bank accounts online is simple and quick. All the consumer needs to do is log into their financial institution(s) with their username and password. Then, they can choose what accounts and data they want to give access to. With Connect, consumers can benefit from their financial data by easily permissioning data and accessing new apps, accounts, or other financial services in minutes.

The entire digital verification process can be broken down into five easy steps:

  1. When it’s time to connect to the bank account, the app or service requests that the consumer permission access to their accounts and provides the terms of the data sharing.
  2. The consumer selects the financial institutions that they want to use and permission the specific accounts to use.
  3. Data is aggregated from the bank or payroll provider and is passed along for its specific use.
  4. Transaction data is intelligently analyzed, summarized, and used by the app or service to verify consumer assets, income, and employment, or account details are used to verify ownership, current balance, or provide account and routing numbers for payment.
  5. For certain use cases, ongoing aggregation of data or refresh of the data to keep data current can also be included.

Why Finicity AI Technology Keeps Consumer Information Up-to-Date and Secure

Data security has become a critical issue, and it will only continue to grow more important as technology evolves. With the constant threat of bad actors, it is paramount to protect consumer information at all times. While the convenience of technology is a great perk, it doesn’t matter if a consumer’s data isn’t safe from security threats.

This is why Finicity is equipped to not only connect to consumer accounts quickly and easily, but to keep their data updated and safe as well. Because financial data is pulled directly from the bank, it isn’t stored by Finicity and only the data permissioned is accessed when it’s needed, minimizing how much data is used and stored. Additionally, our technology does not store consumer information—it grants access to it. This enables consumers to take permission away just as easily as they allowed it. 

On top of data protection, Finicity also encrypts data when it’s in transit and at rest. All of the consumer’s data is protected throughout the process as it would be at the financial institution. 

Instant account verification helps consumers and lenders make wiser financial decisions more quickly and efficiently. To learn more about how Finicity’s services can help streamline financial experiences, read more about our solutions.

It’s a good thing our phones remember our passwords because there are an awful lot of them to keep track of these days. A consumer’s bank account, investment app, lending company, and more are often separate entities providing different information about aspects of the consumer’s financial health.

So what if an individual needs to have access to all of this information at the same time? That’s where account aggregation software comes in. Let’s talk about what this software is, why consumers need it, and how to pick the best one.

What Is Account Aggregation Software?

Account aggregation software collects an individual’s financial data from multiple accounts and consolidates it into a single platform. This means that clients and financial institutions can see bank, credit card, investment data, and other consumer or business accounts all at once. With this holistic view, it’s easy to analyze an individual’s financial situation.

How does it work? While account aggregation may only include data held within a specific financial institution, it can also pull information from outside the institution if the account holder gives permission. Data has historically been collected through screen scraping with a secure login, but increasingly data is aggregated using direct API connections to the financial institution that provides cleaner data and is more secure thanks to tokenized (rather than credentialed) access. While aggregators are moving in that direction, Finicity is already pulling 60% of its data through direct API connections.

Why Consumers Need Account Aggregation Software to Manage Their Financial Data

It’s Personal Finance 101: Consumers need to be able to see the big picture so they can make the best choices, big or small. That’s especially true when it comes to financial planning and management. Account holders and financial institutions alike need to see what’s going on in every aspect of the individual’s finances so that they can make the wisest financial decisions.

Account aggregation can help with financial management and planning. For example, with their financial data all in one place, an account holder can see that their investments are giving them a good return, but their credit card debt is counteracting that progress, making it difficult to achieve their goal of saving for a downpayment on a house. With that holistic picture, consumers can see clearly what they need to change to reach their financial goals.

Account aggregation is also important, for example, for families with multiple financial goals. They might be saving for retirement, college funds, and paying down their mortgage all at once. Having all of this data in one place makes it easier to keep track of each of those goals and their progress.

Other benefits of financial aggregation software include the following:

For account holders and financial institutions, data is key to making the best financial decisions. Account aggregation is a huge step toward collecting and using that data in a way that leads to those wise decisions. What makes this possible? Account aggregation APIs.

Eight Things to Look for in an Account Aggregation API 

While an account aggregation API may not be on an account holder’s radar, it’s crucial for financial institutions, fintechs, and other financial service providers to pick the best one for their clients. Here are eight features individuals and financial institutions should look for in an account aggregation API:

  1. Provides accurate, clean data 
  2. Integrates with all the applications you need it to 
  3. Is compatible with the institutions most often used
  4. Has user-friendly features
  5. Has customizable data aggregation 
  6. Has a low cost to value
  7. Provides robust compliance and security features
  8. Offers great customer care and service 

Finicity provides transaction aggregation that uses an award-winning data access and insights API. This API functions as the building block of consumer-permissioned data, which is then presented to consumers in a user-friendly format. This data comes straight from financial institutions, so it’s accurate and ready to go.

Additionally, if you’re using it for lending, our transaction and statement aggregation is an FCRA-compliant solution that empowers the consumer to make sure it’s accurate. The key account information presented includes the following:

With all of this information visible with a single look, account holders and financial institutions can make better-informed financial decisions.

These days, there are a lot of financial services and accounts we need to access: bank accounts, investment apps, debt consolidation services, lending companies, and the list goes on. Since having a holistic view of our personal finances is crucial for making the best decisions, account aggregation software is a game-changer! Finicity offers account aggregation software that helps both consumers and financial service providers see that crucial holistic view. To try a demo and check out our data access and insights API for yourself, click here.

Ellen Chang of FinLedger discusses the increased adoption of digital banking tools in today’s rapidly changing environment. How open banking has helped organizations put the consumer first in digital experiences.

Read the full article.